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Economics: Making it profitable to protect nature

We create and shape markets to reward cleaning up instead of polluting

Market mechanisms, asset valuations, commodities: How do these concepts relate to environmentalism?

Traditionally, they haven’t. But at EDF, we’re harnessing one of the most powerful forces in the modern world — the pursuit of profit — for the common good.

How: By helping craft markets in which investors, inventors and entrepreneurs have an economic incentive to protect the environment.

Case study: acid rain

Problem: Sulfur dioxide from coal-fired power plants was creating harmful acid rain several decades ago. Traditional regulation would have simply directed every plant owner to cut pollution by a specific amount in a specific way, an expensive and often ineffective solution.

Solution: Our experts proposed a cap-and-trade approach that required overall sulfur emissions be cut in half, but would let each company decide how to do it. Power plants that cut their pollution more than required could sell the extra allowances.

Outcome: Cap-and-trade was so effective and affordable that The Economist magazine called it the “greatest green success story of the decade.”